It would have taken the most eagle-eyed reader to spot the introduction of a single, but hugely significant, word into Amazon.co.uk Limited's annual accounts in 2006. For the first time, the word "fulfilment" was introduced into the description of the company's activities. What would not have been apparent was that this single word marked a new role for Britain under the new ownership in Luxembourg.

In a highly complex transaction, hidden from readers of the statutory accounts, Amazon.co.uk was passed in February 2006 by Amazon.com International Sales Inc to Amazon Europe Holding Technologies SCS, which owned it for a day before selling it to Amazon EU Sarl for €62m (£52m). Amazon.com Inc, the US master company, had already withdrawn its interest in the UK operation when it transferred its holding in December 2005.

The practical effect of this change of ownership, notified to shareholders in the 2007 accounts, was to reduce the UK business to little more than a delivery service. From 2006, sales made in Britain were billed from Luxembourg and any profits from those sales were taxed not in Britain but in Luxembourg. To emphasise the impact of this, the accounts for Amazon EU Sarl show it employed 134 people in 2010 and generated turnover of € 7.5bn. Amazon.co.uk, employing 2,265 people, turned over only £147m in the same year.

Amazon EU Sarl's total sales have reached €23bn and turnover in 2010, the last year for which published accounts are available in Luxembourg, was €7.5bn. Despite this dramatic growth, Amazon EU has not enjoyed enormous profitability. But given that the creation of Amazon EU appears to have been designed to bring down the tax rate applied to the Amazon group profits, this is perhaps not surprising.

Somehow I sense deception. This accounting trick doesn't make clear that they collected the correct "import duties" when making the transactions foreign in nature. I wonder if they knowlingly put their buyers at financial risk or are there similar loopholes that are already taken into accoung with VAT?? No doubt amazon will be scrutinized that they did 100% of everything else above board and if they defrauded a single quid, they'll be bashed for it..